Fracking can hurt property values of nearby homes with wells, study suggests

November 6, 2012 

US NEWS CAMPAIGN-OHIO 4 MCT

Currently in the tracking stage of drilling, this Marcellus Shale drill site sits several miles from the the home of Bob Hickle in Toronto, Ohio.

JASON COHN — MCT

— Property owners near shale gas wells are liable to suffer a major loss in value because of worries over water contamination, according to economists from Duke University and the nonprofit research organization Resources for the Future.Their study found Pennsylvania homeowners who use local groundwater for drinking lost up to 24 percent of their property value if they are within a mile and a quarter of a shale gas well.

But the news was far better for neighbors who get their water piped in. They saw values rise by nearly 11 percent, likely because of lease money from gas drillers and no worries about polluted water, the researchers found.

The study is among the first attempts to measure the impact on property owners of the shale gas boom sweeping the nation. It comes as the need for new regulations is being hotly debated and shale gas critics allege people are getting sick from hydraulic fracturing, or fracking, the process in which high-pressure water and chemicals are injected underground to free up the natural gas in shale rock.

There has been no scientific consensus determining that fracking pollutes groundwater. But the fear is enough to drive down property values, suggests the study, which was recently released by the nonpartisan National Bureau of Economic Research after being completed this summer. The researchers said the 24 percent drop in home values was driven by public perception instead of any actual data showing contamination. And, while those homes would get gas lease payments lessening the impact, the researchers said they are still suffering a big loss relative to the rest of the local housing market.

“The perception of how much risk there is of groundwater contamination from fracking is tremendous,” said Lucija Muehlenbachs of the nonpartisan Resources for the Future, who conducted the study with colleague Elisheba Spiller and Chris Timmins, an economics professor at Duke University.

The researchers looked at property values of all homes in Washington County, Pa., near Pittsburgh. It’s an area at the heart of the shale gas revolution. They found just over 200 homes within a mile and a quarter of a shale gas well.

About half the homes were on piped water. Researchers saw an increase in value in those homes. The other half relied on water wells that drew from local groundwater, and they had a significant loss in value. The researchers suggested that loss could lead to an increase in the likelihood of foreclosure in areas experiencing the rapid growth of hydraulic fracturing.

The researchers suggested their finding “provides added impetus for regulators to protect groundwater under hydraulic fracturing sites and for industry to increase transparency and voluntary action to reduce water contamination concerns.”

The study was dismissed by the Marcellus Shale Coalition, the drilling industry’s top trade group in Pennsylvania. A spokesman responded to the study by saying overall property values have gone up in shale areas and drilling brings jobs and tax revenue.

“Making sweeping assessments based on a narrow data set may help advance a certain narrative, but the facts are clear. Safe, job-creating American natural gas development is bolstering our region’s economy,” coalition spokesman Steve Forde said in an emailed statement.

It won’t be the last study on the contentious subject, and the researchers themselves are starting to take a broader look at all of Pennsylvania. There already is some competing data.

Ohio State University researchers came out with an earlier study, also in Washington County near Pittsburgh. They looked at a narrower time period – about two years rather than five – and suggested drilling had less of an impact on property values.

The Ohio State researchers found about a 4 percent drop in property value for households that rely on private well water within a mile of a shale gas well. The drop was bigger and lasted longer for more rural homes surrounded by farmland, according to the Ohio State researchers. They saw a dip of more than 7 percent in value.

“We find evidence that households are negatively impacted by shale gas exploration activity, but this impact largely depends on the proximity and intensity of shale activity and diminishes over time as risk perceptions adjust following the (end) of exploration activity,” they found.

Email: scockerham@mcclatchydc.com; Twitter: @seancockerham

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